Volume 51, Issue 1: Winter 2017

The Liberal addiction to the Washington Consensus

Peter Pismestrovic, Kleine Zeitung/CagleCartoons.com

Justin Trudeau makes no secret of the fact that he supports “free trade” — that euphemism for corporate-rights agreements. He has declared the Liberal party “the party of free trade.” And of that there is no doubt. Jean Chrétien and Paul Martin took it to the ultimate extreme in the mid-1990s, when Martin boasted that the Liberal government had formally abandoned the post-war industrial policies that created the greatest economic boom and greatest level of equality in the country’s history. He would, Martin promised, focus exclusively on trade.

Only Liberal leader John Turner had the guts to turn his back on the greed of Bay Street and oppose the Canada-U.S. Free Trade Agreement. Since then, Liberal leaders have been hooked on free trade despite its appalling economic record. Is there anything that would give Trudeau and his zealous trade minister, Chrystia Freeland, the courage to break their habit? Is there some equivalent to methadone that we could prescribe for Mr. Sunny Ways?

He could consider joining Free Traders Anonymous and learn from his peers who have gradually weaned themselves from this debilitating policy prescription. One such former addict is Joseph Stiglitz, the Nobel Laureate who now describes these deals in draconian terms: “The real intent of these [investor state] provisions is to impede health, environmental, safety, and, yes, even financial regulations… In the future, if we discover that some other product causes health problems (think of asbestos), rather than facing lawsuits for the costs imposed on us, the manufacturer could sue governments for restraining them from killing more people.”

Or perhaps Trudeau could sit next to Columbia University’s Jeffrey Sachs in group therapy and chat about the Trans-Pacific Partnership — which Sachs has denounced: “These proposed agreements are mostly investor protection agreements … investor protection of property rights of investors, of prerogatives of investors.”

He might even run into Lawrence Summers, one of the most seriously addicted neoliberals who is well on his way to being cured. Summers, a former U.S. treasury secretary and former chief economist with the World Bank, penned an article this past July that questioned many of neoliberalism’s claims and advocated for national policies to address inequality: “Reflex internationalism needs to give way to responsible nationalism or else we will only see more distressing referendums and populist demagogues contending for high office.”

The trend away from the free-trade bandwagon has even infiltrated the International Monetary Fund — the institution responsible for the immiseration of millions through its austerity programs. Jonathan Ostry, the IMF’s deputy director of research, was the lead author of “Neoliberalism: Oversold?” an article in the IMF’s official publication. He stated, “[S]ome aspects of the neoliberal agenda probably need a rethink. The [2008] crisis said: ‘The way we’ve been thinking can’t be right.’” He acknowledged “disquieting conclusions” including the rise of “increased inequality that undermined economic growth.”

Drinking the globalization Kool-aid

It’s not just about these deals or whether or not trade is still driving the global economy. Writing in the Financial Times, Martin Wolf stated it bluntly: “… ratios of world trade to output have been flat since 2008, making this the longest period of such stagnation since the Second World War. According to Global Trade Alert, even the volume of world trade stagnated between January 2015 and March 2016 … globalization is no longer driving world growth.”

Having drunk the free-trade Kool-aid, however, most academic economists, and virtually every mainstream Canadian columnist, studiously ignore compelling counter-arguments presented by Stiglitz, Sachs and others. Canada’s Freeland is a notable devotee, presenting an almost comical example — humiliating herself for the cause by crying when it appeared that the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) might fail in Europe. For this ridiculous spectacle, she was lauded for having saved the deal.

In fact, CETA would probably never have been signed without the progressive veneer provided by the Trudeau government. Massive numbers of Europeans had responded to a European Commission survey on investor-state provisions in trade agreements, with 97 per cent saying they opposed these provisions. This opposition was particularly strong in Germany, with the Social Democratic partner in the government saying CETA’s investor-state provisions were a real problem. But Trudeau personally met with the German Social Democrat leader and Freeland intervened in their party convention to pitch CETA to delegates.

Then when the Belgian region of Wallonia objected, Freeland organized an all-out political pressure campaign she called “Projet Wallonie.” She not only enlisted her staff in this campaign but also got every francophone Liberal MP to call Wallonian politicians — not to defend the agreement but to say how important CETA was to Canada-Wallonia relations and “La francophonie.”

Perhaps the best symbol of how little has changed from the Harper corporate agenda was the big hug Freeland gave former Conservative trade minister Ed Fast in celebration of the October signing of CETA, after she had successfully pressured reluctant Belgian legislators into withdrawing their objections.

This was the same Freeland who warned in her 2012 book, Plutocrats, about “surging income inequality” and how free trade had led to a dramatic hollowing out of middle-class jobs. In appointing her minister of international trade, Trudeau said she was expected to deliver on the Liberals’ election commitment to “strengthening the middle class.” So, how has she done?

First, the government’s claims of “growth and prosperity” for Canada as a result of CETA are completely bogus. Freeland doesn’t answer questions about CETA but is arrogant enough to simply repeat her stock mantra: “CETA is the gold standard of trade agreements.” But her Global Affairs Canada bureaucrats use numbers from a study done up by three European Union economists years ago during the Harper regime. It claimed that CETA would increase GDP by $12 billion and create 80,000 jobs. Even if these numbers were accurate, they are so small as to barely register in a nearly $2 trillion economy.

But they are not. Economist Jim Stanford exposed the study and its preposterous assumptions. In order to conjure up these numbers, the study’s authors assumed “… constant full employment (so no-one can be unemployed due to imports), balanced trade (so a country’s total output cannot be undermined by a trade deficit), no international capital flows (so companies cannot shift investment abroad), and no impact from fluctuating exchange rates.” Not one of these assumptions holds.

Workers will lose thousands

Fortunately, researchers at Tufts University in Massachusetts recently released an unbiased study on CETA, called CETA Without Blinders, which revealed just how disastrous the deal would actually be for workers and GDP. The study concluded that the share of income going to wages and salaries under CETA would decline, and by 2023 Canadian workers would have foregone average annual earnings of about $2,500. In the same time period, 23,000 jobs would be lost and national income would decline by .96 per cent — or about $20 billion.

By now most people paying any attention to these investment protection deals know about the widely denounced investor-state dispute settlement process (ISDS) that gives corporations the power to sue governments for any measure that affects their future profits. With CETA, that includes corporations from an additional 28 countries — and EU companies have proven to be the most aggressive users of ISDS provisions in the world.

CETA includes provisions that are not found in other agreements Canada has signed. All levels of government would be subject to a provision that prevents the restoration of public monopolies or exclusive services delivery once they have been opened to private competition. It severely constrains the ability of all levels of government to give preference to local or provincial suppliers, or demand local labour content for public procurement contracts — an inexplicable gift to EU countries which have already opened procurement to foreign competition. We already have access and could have kept our local preference protected. The offer left the Europeans gushing: “The public procurement market access offer that Canada has made is the most ambitious and comprehensive offer Canada and its provinces have ever made to any partner, including the U.S.” The estimated value of sub-federal procurement in Canada is $100 billion.

CETA constrains domestic regulation with the use of completely new and undefined language, such as requiring that licensing procedures be “as simple as possible” — which could mean requirements for environmental assessments and public consultations would be interpreted by a dispute resolution panel as CETA violations. This and other limits on governments’ authority to regulate have been incorporated into the financial services section of the deal, meaning that Canada’s ability to respond to a financial crisis could be severely compromised.

CETA also exacerbates the problems Canada faced in 2015 as the result of the Temporary Foreign Workers Program. Under current rules, a Labour Market Impact Assessment must be conducted before before a company can import foreign workers. CETA would eliminate that requirement, allowing companies to import workers even in high unemployment areas.

Backing Big Pharma

But for sheer callousness, CETA’s impact on drug costs stands out. CETA will boost the profits of brand-name pharmaceutical companies by extending their patent protections by up to two years, giving Big Pharma more time to reap monopoly profits while they are protected from competition from generic drugs. An article in the November 2016 Canadian Medical Association Journal reports that CETA’s provisions will add another $850 million, at least seven per cent, to Canadians’ annual drug bill.

Even without CETA, Canadians shell out more per capita on pharmaceuticals than any other country aside from the U.S. They also receive poorer coverage under public drug plans than any developed country other than the U.S. One in 10 Canadians cannot fill their prescriptions because of cost, and some provinces provide zero help to the poor to pay for necessary drugs. Skipped medications create added expenses for the health system through increased hospitalizations and emergency room visits, but also contribute to higher patient mortality. The negative impacts of a trade agreement could not be more stark.

Thirty pages of the 130-page bill to implement CETA rushed through Parliament by the Liberals block in these benefits for Big Pharma through amendments to the Patent Act. And not only European pharmaceutical companies stand to gain. The CETA patent extensions will apply to U.S. companies as well, without Canada getting any concession from the U.S. in return.

Cartoon by Edgar Argo/Artizans

In trying to determine whether politicians who support these ugly agreements are lying or have been misled, we have never really found one we could decisively expose. Until now. In Plutocrats, Freeland stated: “Political decisions helped to create the super-elite in the first place, and as the economic might of the super-elite class grows, so does its political muscle. The feedback loop between money, politics, and ideas is both cause and consequence of the rise of the super-elite.”

It is as accurate a description of what has happened in Canada since the first free-trade deal as you are likely to find. That Freeland is now such an ardent champion of that super-elite speaks not only to her hypocrisy but to the price she was willing to pay to be part of the boy’s club that designed the Washington Consensus over 40 years ago.

In response to questions the NDP has raised in the House of Commons about CETA’s impacts on drug costs, small farmers, the ability to regulate under the threat of investor-state challenges, and other concerns, Freeland and her colleagues have come back with the usual non-answers. This dismissive arrogance prompted NDP MP Daniel Blaikie to remind the Liberals that the NDP’s concerns were shared by many people who are “fed up” and who should not have to suffer “this kind of claptrap from parties and politicians who have big business as their allies….”

Downward spiral

The consequences for ordinary Canadians of free trade and other neoliberal policies have been disastrous: the largest income gap between rich and poor since the late-1920s; incomes that have been stagnant since the early 1980s; the second-highest proportion of low-wage jobs in the OECD; the highest personal debt-to-income ratio in Canadian history; work-life balance studies that demonstrate most workers effectively “have no family life.”

The obsession with international trade and its “labour flexibility” imperative continues to drive Canadian workers into a downward spiral of lousy jobs and part-time jobs. A recent Canadian Imperial Bank of Commerce study revealed that the quality of jobs in Canada continues to fall, with ”more low-paid jobs and those earning less than the average wage falling further behind.” The CIBC’s Benjamin Tal found that jobs created in the past 12 years are more likely to be low-paying and that the proportion of employees who earn less than the average wage had increased to almost 61 per cent by 2015. Job quality has been on a steady decline for 10 years. Young people are particularly hard hit. According to the CIBC report, only 15 per cent of people aged 15-24 can be defined as employed — down from 25 per cent in 1980.

This is the grim future under the Harper/Trudeau corporate state. So grim, in Canada and elsewhere, that the UN Conference on Trade and Development’s 2016 Annual Report was essentially a scathing denunciation of the whole Washington Consensus, broadly blaming “[T]he entire edifice of liberal market finance…” The UN’s solution, only hinted at by those still struggling to overcome their addiction to this pernicious ideology, is as clear as neoliberalism is brutal:

The world must jettison neoliberal ideology, and launch a ‘global new deal’ with a blitz of investment on strategic sectors … a return of the ‘developmental state,’ commanding a potent industrial policy, and backed by severe controls on capital flows.


Amen to that.

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